In the following week the euro slid to 89 cents, which is down from US$1.17 at its introduction Jan. 1, 1999. It has so far lost 25 percent of its value against the dollar.

Hints by the European Central Bank that, for the first time, it would use intervention in the open market to support the euro have pushed its value up a few cents. But intervention will not have any lasting effects if it is not internationally coordinated, something that is excluded as the U.S. Treasury and Federal Reserve firmly oppose it.

Further downward pressures hit the euro when the U.S. Federal Reserve nudged up interest rates from 6.0 to 6.5 percent May 16. Rates are expected to be raised further this summer. The European Central Bank is reluctant to raise interest-rates out of fear such a move could cripple the upturn in the business cycle under way in Europe, especially in Germany.

But interest rate differentials between Europe and the United States are not the main cause of the decline of the euro. Since the launch of the euro, capitalists in Europe have invested $150 billion in the United States while only a small fraction of that amount has headed from the United States to Europe.

The reason for this capital flight is that over the last two decades the U.S. rulers have been more successful in getting concessions from unions, enforcing speedup on the job, and holding the line on wage increases than their European rivals. With the partial exception of the United Kingdom, the capitalist powers in Europe are years behind the U.S. rulers in "downsizing," cost cutting, and imposing what the employers call " labor flexibility." They are behind in extending both the workday and workweek, slashing wage rates, and implementing multitier wage agreements.

Although the rulers in France and Germany have made some headway lately, such as on flexible hours, pensions, and taxes, the gap is mostly widening between Europe and the United States. For example, coming out of a recent strike in Norway, workers will get more vacation time each year, something also won in the general strike in Denmark two years ago.

Contractual wage increases won in Norway and through strikes in Finland are higher than in those agreed to by IG Metall in one German province, unsettling what the employers hoped would be seen as a norm for Germany and all of Europe.

The European Central Bank, from a position of weakness, has actually stood aside as the euro has declined in value. This has made goods produced in Europe cheaper in the United States, sparking an export-led spurt in growth, especially in Germany and France, the two countries that make up about half of the euro zone's economy. The French economy added 142,300 jobs in the first quarter this year, the most since record keeping began in 1970. In Germany, the business research institute IFO said that a monthly survey of 6,000 executives in April showed business confidence at the highest level since German reunification in 1990.  
 
Differences between Paris and Bonn
In mid-May, France's prime minister, Lionel Jospin, stressed the need to bolster the euro, while Chancellor Gerhard Schröder of Germany said that while he thought the euro would rebound, its weakness has helped by making exports cheaper. "There is no other country in the world that is more dependent on exports than Germany," he said. "We should not cry when our exports benefit." The German Bundesbank, in a statement issued in late May, criticized the German government's neglect of the problems with the decline in the euro.

"The temporary competitive advantages from depreciation cannot in any case outweigh the possible damage to confidence," the statement from the German central bank said May 24.

Another sign of the worries over the decline of the euro in the ruling class in Germany were demands by conservative politicians that Greece be barred from adopting the euro for several years. The European Commission had recommended in early May that Greece be allowed to join. Edmund Stoiber, the head of state in Bavaria, blamed the euro's decline in part on the news about Greece.

The decline of the euro is strengthening forces in every country in Europe that oppose the European Union and the euro. Exchange rate problems are one of the reasons that Rover in Britain is slashing jobs and thousands are getting laid off at the Ford Dagenham plant in London.

The pound sterling has risen with the U.S. dollar, making goods produced in Britain expensive compared to goods produced in continental Europe. In Denmark, a referendum will be held on whether Denmark will adopt the euro in September this year. The rulers in Denmark are worried about a "no" vote like that which voted down the Maastricht accord in 1992.

In Sweden the rulers want to postpone a decision on joining the euro as they also are worried that it would be defeated in a referendum if the euro continues to decline.

The euro is a set of social relations that reflects the relatively weak standing the ruling classes in Europe have in relation to both the working class at home and to their capitalist rivals in other parts of the world--especially the United States--on military, political, and economic fronts. By adopting a common currency and measures to break down national barriers to the free flow of trade and commerce, the ruling classes in most European countries sought to cobble together a counterbalance to the huge U.S. market and bolster their competitiveness with U.S. imperialism in the world.  
 
A weak currency
The euro was the political solution agreed upon to try to tackle a whole range of problems the ruling classes in Europe are facing--especially how to take Europe out of the crises caused by falling rates of profit and their competitive disadvantage vis-à-vis the United States.

But within the first year after the "birth" of the euro, the European imperialist powers became even more dependent on the United States. On the military side, the conflict in Kosova proved the irreplaceable role of Washington's war machine on the European continent. Economically, the United States became more than ever the motor of the whole world economy. It is clear, for example, that a recession in the United States would bring with it devastating conditions around the world.

Since its birth, the euro has lost its shine, and the underlying weaknesses of the European imperialist powers have come to the fore. Without a common foreign and military policy, for example, a stable monetary union cannot hold over an extended time. The recent war in Kosova demonstrated tensions between governments in Europe over Yugoslavia and the expansion of NATO and the European Union into Eastern and Central Europe.

Tensions between Paris and Berlin constantly come to the surface over the euro, interest rates, taxes, fiscal policy, farm subsidies, and other questions.

Carl-Erik Isacsson is a member of the metal workers union in Södertälje, Sweden.  
 
 
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